TIOL-DDT 1441 · the untouched capture
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<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399" size="3">TIOL-DDT 1441 </font><br>
09.09.2010 <br>
Thursday </strong></font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Services rendered to SEZ units/ Developers and Rule 6 of <em>CENVAT Credit </em>Rules 2004 </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>AS</strong> per Rule 6 (1) of the <em>CENVAT Credit</em> Rules 2004, <em>CENVAT Credit</em> shall not be allowed on the inputs or input services used in the manufacture of exempted goods or provision of exempted services. Certain categories of exempted goods are excluded from the purview of Rule 6(1) which are mentioned in Rule 6(6). For example, </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(6) The provisions of sub-rules (1), (2), (3) and (4) shall not be applicable in case the excisable goods removed without payment of duty are either- </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>(i) cleared to a unit in a special economic zone or to a developer of a special economic zone for their authorized operations </em></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">But, what about the services rendered to the units in SEZs/ Developer of SEZ, which are exempted by <em><strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=40&filename=notification/servicetax/2009/stnot09_009.htm" target="_blank">Notification No 9/2009 ST Dated 3rd March 2009</a></strong></em>? As per this notification, services consumed wholly in the SEZs are exempted. While the provisions of Rule 6(1) are excluded for supply of goods to SEZ units/ Developers, when it comes to services, no such exclusion is provided with the result that the suppliers of services to SEZ units / Developers either should not avail credit of inputs or input services used for such services rendered to SEZ units/ Developers or follow the procedure under sub-rules (2), (3) or (3A), which is discriminatory against the supplier of services. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Further, in respect of the services not wholly consumed within the SEZs, the exemption under <em>Notification 9/2009-ST </em>operates through refund of service tax paid by the service provider. In such cases, whether the provisions of Rule 6 (1) are attracted for the supplier of the services? </font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>New Format of Return for Clean Energy Cess </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> Central Government has notified a new format of return to be filed by assessees who are liable to pay clean energy cess. Further it is also clarified that the return will have to be filed not later than 10th day of the second month, following the month in which removals were made. For e.g. the return for the month of July 2010 shall be filed by September 10, 2010. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In fact the relevant rule (Rule 11) prior to this amendment also mentions the same. But probably due to some confusion owing to the choice of the words and phrases used therein, the Government thought it fit to amend the rule and also insert an illustration to clarify this aspect. </font></p>
<p align="justify"><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=wnew/ces10_07.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">NOTIFICATION NO. 7/2010-Clean Energy Cess, Dated: September 8, 2010 </font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Account Code for Clean Energy Cess and Registration Glitches – TRU Clarifies </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Earlier TRU had communicated that the Office of Chief Controller of Accounts had been requested to assign a minor head for payment of this cess both on domestic and imported coal (netizens may refer to paragraph 8 of <strong><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=wnew/ces10_tru_letter.htm" target="_blank"><em>Circular No. F.No.354/72/2010-TRU., Dated: June 24, 2010</em></a>)</strong> . </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now, based on the suggestion from Office of the Principle Chief Controller of Accounts, TRU clarifies that pending opening of a new Head of Account, the Cess being deposited by assessees may be accounted for under Sub-Head/Minor Head of Accounts Receipt Awaiting Transfer to other Minor Head etc under the Major Head 0038-Union Excise Duty. <strong>The reduced accounting code to be quoted for depositing Clean Energy Cess is 00380086 (U.E.D)</strong>. It is further stated that a s soon as a specific Minor head is received from PCCO's office, the same will be communicated accordingly. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Further, it has been brought to the notice of TRU that ACES application for registration under the Central Excise Rules, 2002 does not provide for "Producer" as a separate class of registrants. In this regard, it has been suggested by the Directorate of Systems that an applicant seeking registration as a "producer" may register through ACES by selecting the category of registration as a "manufacturer". After examining this suggestion, it is clarified by the TRU that an applicant seeking registration as a "producer" shall register through ACES by selecting the category of registration as a "manufacturer". </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Also, in order to integrate the monthly return form viz., <a href="http://www.taxindiaonline.com/RC2/pdfdocs/wnew/cec07-2k10-formI.pdf"><strong>FORM-I</strong> </a>of the clean energy cess with systems format, the same has been changed as suggested by the Directorate of Systems, vide <em>Notification No.7/2010</em> -<strong> <a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=wnew/ces10_07.htm">Clean Energy Cess, dated September 8, 2010</a></strong>. Rule 11 of the Clean Energy Cess Rules is also modified through this notification so as to align it with the payment date. According to the amended rule, the return is due by the 10th day of the second month , following the month in which removals were made. For example, the Return for the month of July 2010 shall be due by the 10th of September, 2010. </font></p>
<p><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=wnew/ces_cir2010.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">TRU Letter F.No.354/72/2010-TRU., Dated: September 8, 2010 </font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Anti Dumping Notification for Bus and Truck Radial Tyres Amended </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Anti Dumping <em><strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=23&filename=notification/custom/2010/ctariff10_012.htm" target="_blank">Notification No. 12/2010-Cus dated February 19, 2010</a></strong></em> is amended to incorporate the correct spelling of the name of a Chinese producer/exporter listed at S. No. 1 of the said notification. </font></p>
<p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=23&filename=notification/custom/2010/ctariff10_086.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">NOTIFICATION NO. 86/2010–Cus., Dated: September 1, 2010 </font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">DGFT Amends Format of Bank Realization Certificate </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>DGFT</strong> has notified an amended version of the Bank Realization Certificate in Appendix 22A of the Hand Book of Procedures (Vol. 1) of Foreign Trade Policy 2009-2014. </font></p>
<p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=47&filename=notification/dgft/2010/dgft10pn009.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">PUBLIC NOTICE NO. 9/(RE: 2010)/2009-2014, Dated: September 7, 2010 </font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Revenue Wins a Major Tax Battle in Mumbai High Court </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> multi billion dollar tax dispute between Vodafone International Holdings B.V. and Income Tax Department which witnessed a see-saw battle of wits between the assessee and the tax authorities in multiple round of litigations finally culminated in the Apex Court directing the Assessing Officer by way of a remand to pass an order on the issue of jurisdiction and nexus for deducting tax at source in India. The Assessing Officer passed the order in favour of the Revenue. Against this order of the AO, the assessee again filed a Writ Petition in the Mumbai High Court challenging the locus standi of the Indian tax authorities to deduct tax at source on what the assessee contended as a transfer of shareholding of one foreign entity by another foreign entity for a consideration, with no nexus to Indian territory and hence no scope for deduction of tax at source in India. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">After deliberating extensively on various submissions made by legal luminaries from both sides, the Mumbai High Court observed, “From the perspective of Income Tax Law what is relevant is the place from which or the source from which the profits or gains have generated or have accrued or arisen to the seller. The income accrued and arose and was derived as a consequence of the divestment of HTIL's interest in India. If there was no divestment or relinquishment of its interest in India, there was no occasion for the income to arise. The real taxable event is the divestment of HTIL's interests which comprises in itself various facets or components which include a transfer of interests in different group entities.” </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As regards deduction of tax under section 195, the High Court observed, “the provisions of Section 195 of the Income Tax Act, 1961 are in the nature of a machinery provision enacted in order to effectuate the collection and recovery of tax. Given a sufficient territorial connection or nexus between the person sought to be charged and the country seeking to tax him, income tax may extend to that person in respect of his foreign income. The connection can be based on residence or business connection within the taxing State or the situation within the State of an asset or source of income from which the taxable income is derived. Once the nexus is shown to exist, the provisions of Section 195 would operate. Even though the revenue laws of a country may not be enforceable in another, that does not imply that the Courts of a country shall not enforce the law against the residents of another within their own territories.” </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">On the matter of jurisdiction of Indian tax authorities, the High Court observed, “In the present case, the transaction in question had a significant nexus with India. The essence of the transaction was a change in the controlling interest in HEL which constituted a source of income in India. The transaction between the parties covered within its sweep, diverse rights and entitlements. The Petitioner by the diverse agreements that it entered into has a nexus with Indian jurisdiction. In these circumstances, the proceedings which have been initiated by the Income Tax Authorities cannot be held to lack jurisdiction.” </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Please see our detailed analysis on this Judgment in ‘Breaking News' </font></p>
<p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600">Jurispruden</font><font color="#FF6633" size="5">tiol</font><font color="#006600"> – Friday's cases</font></strong></font></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><img src="http://www.taxindiaonline.com/RC2/image/stories/ddt_hammer.jpg" alt="Legal Corner Icon" width="100" height="84" hspace="5" border="0" align="left"><strong><font color="#663399">Income Tax</font></strong> </font></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Income
tax - Sec 80IA - Is excess realisation over and above actual work eligible
for deduction - Yes, says ITAT</font></strong></p>
<p align="justify"><font size="2"><strong><font face="Verdana, Arial, Helvetica, sans-serif">MUMBAI,
SEPT 10, 2010: THE </font></strong><font face="Verdana, Arial, Helvetica, sans-serif">issue
before the Tribunal is - </font></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Whether
the excess realization over and above the actual work done by the assessee
is also eligible for deduction u/s 80-IA(4). And the answer is YES.</font></p>
<p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Central Excise </font></strong></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Each
person has to defend their own case and there is no provision in the Act
that appeals shall lie before the same authority under a common show-cause
notice – appellant to defend their own case and not take shelter
of others on legal issue - appeals against order of Commissioner(A) relating
to rebate of duty is not maintainable: CESTAT </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong> THIS </strong> is a case of claim of rebate of duty of excise
on goods exported by the appellant. A
common show cause notice was issued to all the parties and the same was adjudicated
by the Addl. Commissioner against whom the appellants along with their co-noticees
filed appeals before the Commissioner(Appeals), who by a common order disposed
of the appeal of the appellant also. </font><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The
co-noticees had also filed appeals before the CESTAT and the Bench had remanded
these appeals after due consideration as maintainable.</font></p>
<p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">See our columns Tomorrow for the judgements </font></strong></p>
<p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until Tomorrow with more <strong>DDT</strong></font></p>
<p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Have a nice day </font></p>
<p><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Mail your comments to</font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> <a href="mailto:vijaywrite@taxindiaonline.com"><strong>vijaywrite@taxindiaonline.com </strong></a></font></p>
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